NDA's budgets

In true colours

Print edition : April 17, 2015

The Centre aims to provide 'water to every field" with an allocation of just Rs.1,000 crore in the Budget. Here, a farmer waters his field near Guwahati. Photo: Ritu Raj Konwar

The BJP-led NDA government has, in the two Budgets it has presented so far, revealed itself to be very different from the pro-farmer image that its leading election campaigner and now Prime Minister, Narendra Modi, projected.

THE Bharatiya Janata Party’s manifesto for the 2014 Lok Sabha election states: “Agriculture is the engine of India’s economic growth and the largest employer, and BJP commits highest priority to agriculture growth, increases in farmers’ income and rural development.” It also resolved to “take steps to enhance the profitability in agriculture by ensuring a minimum of 50 per cent profits over the cost of production, cheaper agriculture inputs and credits, introducing latest technologies for farming and high-yielding seeds and linking MGNREGA to agriculture”.

These promises had been made by Narendra Modi during the election campaign, specifically in the rural areas. Indeed, farmers voted heavily for the BJP in Uttar Pradesh, Rajasthan, Bihar and other States.

However, the promises turned out to be “chunavi jumla”, a term coined by BJP president Amit Shah on the unfulfilled/unrealistic promises made in party manifestos and public rallies. The Central government declared the minimum support price (MSP) for different crops for 2014-15 and 2015-16, but the increases were lower than those given by the earlier United Progressive Alliance (UPA) government. The government’s reply to a question in Parliament as well as to a public interest litigation (PIL) petition signified a withdrawal from its election promises. On both occasions, the government argued that the 50 per cent profit on input cost as recommended by the National Commission on Farmers chaired by agricultural scientist M.S. Swaminathan was not a consideration for fixing the MSP. More importantly, one of the first policy initiatives of the government was to ask States to discontinue the practice of offering a support price higher than the MSP fixed by the Centre for wheat and rice on the plea that it distorted the market and drove away private buyers.

These “chunavi jumlas” militate against the basic premises on which the National Democratic Alliance (NDA) would function. The first among the premises was that the agriculture sector recorded an annual growth of 3.8 per cent in value-added in the decade from 2004-05, which was the highest in any decade since 1950-51. There was a 31 per cent increase in real prices of farm produce during the period 2004-05 to 2011-12 (Chand, 2014). Two, the National Sample Survey (70th round, 2012-13) estimated that the monthly income of a rural household was Rs.6,426 lower than the earnings of the lowest paid employee in the government or the organised sector. Three, for the first time in the history of Indian agriculture, the absolute numbers of agricultural labourers and cultivators had started falling. Four, from various policy initiatives it appeared that the government had set as its long-term goal the raising of farmers’ income through productivity enhancement, without raising support prices, and by withdrawal of the government from the agricultural market.

In this context, Finance Minister Arun Jaitley’s otherwise right statement in the 2015-16 Budget speech—that “the Union Budget is essentially a Statement of Account of public finances, it has historically become a significant opportunity to indicate the direction and the pace of India’s economic policy”—acquires very different meanings. In other words, the NDA government has presented two Budgets, and a probe on the “direction and pace” of the Budget with reference to agriculture throws up a number of concerns.

The first Budget of the NDA government in July 2014 was an extension of the UPA’s interim Budget, but several big bang schemes, which promised to boost agricultural productivity, were announced in it. An analysis of some of these schemes follows:

Pradhan Mantri Krishi Sinchayee Yojna (PMKSY): It aims to provide “water to every field” with an allocation Rs.1,000 crore. Considering the ambitious target and size of non-irrigated land, it appears to be mere tokenism. Even the tokenism has not yet translated into action on the ground; the Finance Ministry admitted in Parliament that a concept note is under preparation.

Price stabilisation fund: Price spikes and volatility are regular happenings in the agriculture market and are not limited to perishables but include cereals, pulses and even sugar. A sum of Rs.500 crore has been allocated to check price volatility in the agriculture market. An update on this scheme in the Mid Year Economic Analysis (MYEA 2014-15) states that a draft Expenditure and Finance Committee memo proposes a revolving fund of Rs.500 crore for providing working capital to States and to Central/State agencies for the procurement and distribution of perishable and horticultural produce.

The government changed the domain from agricultural produce to horticultural produce. Indications are that the government is planning to reduce it further for only onion and potato. This is evident from the draft released by the Agriculture Ministry. It read as follows: “To begin with, interventions would be supported for onion and potato only. However, other commodities may be added further.” The reports that the government refused to provide any financial help to the debt-ridden National Agricultural Cooperative Marketing Federation of India (NAFED), the apex body responsible for market intervention in farm commodities beyond the crops covered under the MSP regime, need to be read together with this. Another big bang project of Budget 2014 promised the establishment of two institutions of excellence in Assam and Jharkhand with the allocation of Rs.100 crore each. Jharkhand has identified the land for the project, while the response from the Assam government is awaited. These two institutions will be part of the Indian Council of Agricultural Research (ICAR), and the allocations, meagre as they are, will further drain public funds meant for agriculture research and development.

The flagship soil health card scheme has been allocated Rs.100 crore, but it has been rolled out only in Rajasthan so far amid confusion on the implementing agency. However, the Rs.56 crore allocated for 100 mobile vans for setting up 47 mobile soil-testing laboratories has been released to the States.

The Budget had provided for increased credit flow to the agriculture sector, but after the “broadening” of the definition of agriculture for loan purposes, the share of small and marginal farmers has decreased, while the numbers of those seeking loans exceeding Rs.10 lakh has increased. The latter amount is disbursed mainly to “agriculture companies”.

So Budget 2014 took cognisance of most of the agricultural issues and did have a thrust on productivity, but considering the size and diversity of the sector, the scale of both resources allocated and policy initiatives announced was very small. In short, there was tokenism at work.

Budget 2015 extended this tokenism and for the first time shifted the responsibility of agricultural development to the State governments. This followed the increased tax devolution recommended by the 14th Finance Commission. But most States do not have any clear policy on how to strengthen and advance agriculture.

In Budget 2015, the total outlay for agriculture has come down by 10.4 per cent, to Rs.28,050 crore from Rs.31,322 crore, in 2014-15. The allocation for crop husbandry has been reduced to Rs.39,868 crore from Rs.41,681 crore, while for animal husbandry it is down to Rs.330 crore from Rs.599 crore. The allocation for major and medium irrigation has been reduced to Rs.572 crore from Rs.1,121 crore, while for minor irrigation it is down to Rs.306 crore from Rs.468 crore.

There is a reduction in the Centre’s share to the tune of Rs.5,500 crore in Centrally sponsored schemes such as the Rashtriya Krishi Vikas Yojna (RKVY) and the National Food Security Mission (NFSM), which played a major role in agriculture achieving a 3.5 per cent growth rate between 2004 and 2013. As the formula of sharing between States and the Centre is not specified, it is likely that State governments will use these funds to meet other priorities.

For the second consecutive year, flagship schemes in agriculture received meagre allocations: Rs.200 crore for the soil health card scheme, Rs.2,000 crore for the PMKSY, Rs.1,800 crore for minor irrigation and Rs.1,500 crore for the watershed development programme. However, to encourage private investment in agriculture, credit flow has been increased substantially, from Rs.8 lakh crore to Rs.8.5 lakh crore, Rs.25,000 crore for the Rural Infrastructure Development Fund (RIDF), Rs.15,000 crore for the Long-Term Rural Credit Fund, Rs.45,000 crore for the Short-Term Cooperative Rural Credit Refinance Fund and Rs.15,000 crore for the Short-Term Regional Rural Bank (RRB) Refinance fund. To what extent private investment through credit flow has helped in raising farmers’ income vis-a-vis increased production needs to be studied. It appears that by providing loans, the government intends to transfer its responsibility of public investment to private investment by farmers, that too not from savings but through loans.

The ill effects of raising loans on crops is evident in the current spree of farmer suicides after unseasonal rain resulted in the devastation of crops. The main reason for the suicides according to family members of deceased farmers is the fear of defaulting on loan repayment and the consequent punitive action by banks.

There is a provision of Rs.200 crore in the Budget for the development of a common national market for agricultural commodities through e-platforms. Currently, agricultural commodities are traded in mandis established and regulated under the State’s Agricultural Produce Market Committee (APMC) Act. These mandis are accessed predominantly by local traders. Thus, farmers have no alternative but to sell their produce in these mandis through commission agents. The national common market is expected to bring more transparency owing to wider participation, a uniform market fee structure and uninterrupted inter-State movement of commodities. Again, it depends on the States; the Centre’s model APMC Act has not been enacted by various State governments.

The Paramparagat Krishi Vikas Yojna, a new scheme to satisfy supporters of traditional agriculture or “organic farming”, is a good idea but needs sustenance on a continuous basis.

The other factor that would have far-reaching implications on the agriculture sector is the implementation of the Shanta Kumar Committee report of unbundling the Food Corporation of India. The FCI is responsible for the purchase of foodgrains, especially wheat and paddy, at MSP from farmers in different States. The logic advanced by the committee, that only 6 per cent of total farmers in the country have access to a government procurement agency, is an effort to make a case for the withdrawal of the government from the purchase of crops and consequently from the announcement of MSPs.

Some economists who are in high positions in this government have advocated the free play of market forces in the procurement and storage of foodgrains and cash subsidy or food coupons in place of the physical transfer of ration through the public distribution system (PDS). However, millions of sugarcane growers are struggling to get their dues after the abolition of government control, through a release mechanism, in the domestic sugar market as per the recommendations of the Rangarajan Committee.

From the analysis of the Budgets and the various policy measures of the NDA government, it appears that there is no immediate plan to raise the income of small and marginal farmers that touched a new low. The long-term plans are symbolic in nature and may result in increased productivity but without translating into farmer income, which it can even affect adversely sometimes. The worrying factor is that the Central government shifted financial responsibility to the State government for continuing schemes that have a proven track record of helping farmers.

The recent happenings in some of the States should come as a warning for Modi, and the march and agitations against the land ordinance/Bill are a pointer that his pro-farmer image is fading fast.

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